ICLG – International Arbitration: a practical cross-border insight into international arbitration work – Brazil

27/08/2019

Antonio Tavares Paes Jr.

Vamilson José Costa

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1. Arbitration Agreements

1.1 What, if any, are the legal requirements of an arbitration agreement under the laws of your jurisdiction?

The Brazilian Arbitration Law (Federal Law No. 9.307/1996 – “BAL”) distinguishes two different types of arbitration agreement depending on whether the dispute has already arisen or not: the submission agreement and the arbitration clause.

The BAL provides that the arbitration clause shall be in writing, contained in the contract or in a separate document referring thereto (Article 4, First Paragraph).

Nevertheless, the BAL does not specify whether the arbitration agreement must be signed by the parties in order to be effective. Faced with this issue, on 26 April 2016, the Federal Court of Appeals (Superior Tribunal de Justiça – STJ), deciding on REsp 1.569.422, ruled that a tacit acceptance of the arbitration clause is sufficient, and that the signature on the clause or on the contract in which it is contained is not required, so long as consent by both parties to submit the dispute to arbitration is evidenced by other circumstances.

The BAL provides, however, additional requirements to enforce arbitration agreements in contracts of adhesion and standard form contracts (Article 4, Second Paragraph), where the signature of the subscribing party is required.

1.2 What other elements ought to be incorporated in an arbitration agreement?

When drafting and tailoring an arbitration clause, the parties should also agree on: (i) the choice between ad hoc and institutional arbitration; (ii) the number of arbitrators and the rules regarding the constitution of the arbitral tribunal; (iii) the seat of the arbitration; (iv) the language of the proceedings; and (v) the laws applicable to the merits of the dispute (likewise, should the parties agree on an arbitration in equity, it ought to be expressly indicated).

1.3 What has been the approach of the national courts to the enforcement of arbitration agreements?

After the enactment of the BAL in 1996, the confirmation of its constitutionality by the Brazilian Supreme Court in 2001, and the ratification of the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) in 2002, Brazilian courts have become more willing to enforce arbitration agreements and awards. Currently, Brazilian courts have consistently enforced arbitration agreements and consolidated a pro-arbitration scenario supported by case law from the higher courts.

2. Governing Legislation

2.1 What legislation governs the enforcement of arbitration proceedings in your jurisdiction?

The laws that govern the enforcement of arbitration proceedings in Brazil are: (i) the Brazilian Arbitration Law, enacted under No. 9.307, dated 23 September 1996, and amended by the Federal Law No. 13.129, dated 26 May 2015; (ii) the Brazilian Code of Civil Procedure, enacted under No. 13.105, dated 16 March 2015; (iii) the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, internalised through Decree No. 4.311, dated 23 July 2002; (iv) the Internal Rules of the Federal Court of Appeals (Superior Court of Justice – STJ); and (v) Resolution No. 9, issued by the Federal Court of Appeals, dated May 2005.

2.2 Does the same arbitration law govern both domestic and international arbitration proceedings? If not, how do they differ?

Brazilian law does not distinguish domestic arbitration from international arbitration. Nevertheless, for the purpose of enforcement of arbitral awards, Brazilian law makes a distinction between domestic and foreign awards. A foreign award is an award issued outside of the Brazilian territory (Article 34 of the BAL) and is subject to homologation/ratification by the Federal Court of Appeals (Article 35 of the BAL). On the other hand, a domestic award is an award issued within the Brazilian territory and may be enforced in a straightforward manner by Brazilian courts without the need to go through a homologation/ratification process (Article 31 of the BAL).

2.3 Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

The BAL was inspired by the UNCITRAL Model Law, but also by the Spanish Arbitration Act of 1988, and the New York Convention and the Inter-American Convention on International Commercial Arbitration (“Panamá Convention”) (internalised through Decree No. 1.902, dated 9 May 1996).

Probably, one of the most significant differences between the BAL and the UNCITRAL Model Law concerns the indistinct treatment given by the former to both domestic and international arbitration. We note that the latter does not provide any legal consequences arising from the place of issuance of an award, whereas the former grants immediate enforceability to awards rendered within the Brazilian territory, and demands a prior exequatur proceeding for awards rendered abroad.

2.4 To what extent are there mandatory rules governing international arbitration proceedings sited in your jurisdiction?

Brazilian law does not make a distinction between national and international arbitration except for the purposes of homologation/ratification of the latter before the Federal Court of Appeals. That being said, Brazilian law has very few mandatory rules regarding arbitral proceedings, which shall, however, respect some major procedural principles, such as the equal treatment of the parties and the impartiality of the arbitrators.

3. Jurisdiction

3.1 Are there any subject matters that may not be referred to arbitration under the governing law of your jurisdiction? What is the general approach used in determining whether or not a dispute is “arbitrable”?
As a general rule, a dispute may be referred to arbitration when it is related to disposable rights. Administrative and judicial claims arising from the activities carried out by private parties under the rules of public departments and/or public agencies (that are of public interest) may not be referred to arbitration, such as environmental matters, anti-trust and competition matters. Although there are exceptions within the aforementioned matters, leading to a case-by-case analysis, the law is broad and therefore any dispute that is related to disposable rights may be arbitrated.
Recent amendments to the BAL clarified certain matters that have always been controversial under the local legal landscape and provide for: (i) the possibility that government-controlled entities refer to arbitration their disputes that are related to disposable rights; (ii) the possibility to establish arbitration clauses in employment agreements when the employees are directors or statutory managers; and (iii) rules for arbitration involving a consumer relationship. Amendments were made also to the Brazilian Corporation Law (Law No. 6.404/1976) in order to define whether or not shareholders are bound to arbitration clauses included in a company’s by-laws, providing also for the possibility that the dissenting shareholder leave the company. More recently, amendments to Brazilian labour laws have also allowed, under certain conditions, arbitration clauses to be inserted in labour contracts.

3.2 Is an arbitral tribunal permitted to rule on the question of its own jurisdiction?
The BAL provides, in the Sole Paragraph of Article 8 and Article 20, that the arbitral tribunal has jurisdiction to decide the issues concerning the existence, validity and effectiveness of the arbitration agreement, as well as of the contract containing the arbitration clause, embracing, thus, the competence-competence principle. On 20 April 2018, the Federal Court of Appeals (“STJ – Superior Tribunal de Justiça”) confirmed once more the applicability of the kompetenz-kompetenz principle (REsp 1550260/RS).

3.3 What is the approach of the national courts in your jurisdiction towards a party who commences court proceedings in apparent breach of an arbitration agreement?

Brazilian courts have been very positive towards arbitration and, in general, have dismissed, without ruling on the merits, court proceedings initiated in breach of arbitration agreements. Nevertheless, the breach of an arbitration agreement must be argued by the party, otherwise there is an assumption that the parties have forgone their right to enforce the arbitration agreement (Brazilian Civil Procedure Code, Article 337, §§5 and 6).

3.4 Under what circumstances can a national court address the issue of the jurisdiction and competence of an arbitral tribunal? What is the standard of review in respect of a tribunal’s decision as to its own jurisdiction?
National courts are not allowed to review an arbitral tribunal’s decision as to its own jurisdiction based on the competence-competence principle. However, Brazilian courts may assess the jurisdiction and competence of the arbitral tribunal if the award is challenged by the parties. The standard of review, however, is highly deferential.

3.5 Under what, if any, circumstances does the national law of your jurisdiction allow an arbitral tribunal to assume jurisdiction over individuals or entities which are not themselves party to an agreement to arbitrate?

Brazilian law does not address the issue as to the extension of the arbitration agreement to non-signatory parties. Nevertheless, Brazilian courts have already recognised the possibility of extending the arbitration agreement when there is evidence that a party has participated in the negotiations or enforcement of the agreement in which the arbitration clause is contained, or was represented in the legal business or in arbitration by the non-signatory party (i.e. Trelleborg v. Aneel [State Appellate Court of São Paulo, Appeal No. 267.450-4/6, 7th Chamber, Reporting Judge Constança Gonzaga, judged 24 May 2006]; Comverse Inc. v. American Telecommunication [Federal Court of Appeals, SEC No. 3.709/US, Special Panel, Reporting Judge Teori Albino Zavascki, judged 14 June 2012]; and L’aiglon S/A v. Têxtil União S/A [Federal Court of Appeals, SEC No. 856/EX, Special Panel, Reporting Judge Carlos Alberto Menezes Direito, judged 18 May 2005]). We note, however, that the case law is not always consistent in this matter and courts have mostly proceeded to a case-by-case analysis.

3.6 What laws or rules prescribe limitation periods for the commencement of arbitrations in your jurisdiction and what is the typical length of such periods? Do the national courts of your jurisdiction consider such rules procedural or substantive, i.e., what choice of law rules govern the application of limitation periods? The Brazilian Civil Code provides for statute of limitation periods (Article 206) that vary from one (1) to ten (10) years depending on the substantive issue under discussion. Limitation periods are considered a substantive rule and are mandatory.

3.7 What is the effect in your jurisdiction of pending insolvency proceedings affecting one or more of the parties to ongoing arbitration proceedings?

Brazilian courts have already recognised the survival of ongoing arbitral proceedings seeking the declaration of a debt when a party requested creditors’ protection in a reorganisation proceeding or when the bankruptcy of a party to such arbitration is declared (Saúde ABC v. Interclínicas [Federal Court of Appeals, Provisional Measure No. 14.295/SP, Reporting Justice Nancy Andrighi, judged 13 June 2008]). In these cases, the amounts assigned by the award will be included in the schedule of creditors in the insolvency proceedings.

4. Choice of Law Rules

4.1 How is the law applicable to the substance of a dispute determined?

The parties to an arbitration proceeding are entitled to choose the law applicable to the dispute and also agree that the arbitration be conducted under the general principles of law, customs, usages and international rules of trade (Article 2 of the BAL).

4.2 In what circumstances will mandatory laws (of the seat or of another jurisdiction) prevail over the law chosen by the parties?

Mandatory rules will apply when the chosen law violates good morals and/or public policy/order (Article 2 of the BAL).

4.3 What choice of law rules govern the formation, validity, and legality of arbitration agreements?

The BAL applies to arbitration agreements whenever the award is issued in Brazil.

Regarding awards issued abroad, the recognition and enforcement of such awards will consider the validity of the arbitration agreement under the parties’ chosen law to govern the arbitration agreement or, in case the parties are silent, under the law of the seat of the arbitration (the law of the State where the award was issued). Moreover, the arbitration agreement ought to respect the objective arbitrability according to Brazilian law standards.

5. Selection of Arbitral Tribunal

5.1 Are there any limits to the parties’ autonomy to select arbitrators?

Brazilian law does not impose limits in terms of the selection of the arbitrators, but they must meet the requirements of independence and impartiality (Article 14 of the BAL and 144 et seq. of the Brazilian Code of Civil Procedure). The rules of an Arbitration Centre in which a particular arbitration is under development, however, may impose limits to the parties’ autonomy to select arbitrators, such as mandating that arbitrators be selected from a pool of professionals indicated by such entity.

5.2 If the parties’ chosen method for selecting arbitrators fails, is there a default procedure?

The default procedure is provided in Article 7, Fourth Paragraph, of the BAL, which provides that a court judge will appoint the arbitrator to settle the dispute in case the arbitration agreement does not indicate the method for selection of arbitrators and/or the parties disagree as to such selection. This article does not apply where the parties have chosen the rules of an Arbitration Centre that already provides for a default procedure.

5.3 Can a court intervene in the selection of arbitrators? If so, how?

A judge is allowed to appoint a sole arbitrator or one or more members of the arbitral tribunal (as provided by the arbitration clause, should it be the case) after hearing the parties in cases where there is resistance from one of the parties as to the commencement of the arbitration proceedings, or the arbitration agreement fails to provide for the appointment of arbitrators (Article 7, Fourth Paragraph, of the BAL).

Nevertheless, should the respondent party fail to reply to the court proceedings relating to the appointment of arbitrators, the judge must appoint a sole arbitrator to decide on the matter, irrespective of whether the arbitration clause provided for an arbitral tribunal composed by three arbitrators (Article 7, Sixth Paragraph, of the BAL).

The BAL also entitles a national court to intervene in the selection of arbitrators if there is disagreement between the arbitrators as to the appointment of the president of the arbitral tribunal (Article 13, Second Paragraph).
In all cases, the BAL will apply in completion to the rules of the selected arbitration institution; this includes ad hoc arbitration.

5.4 What are the requirements (if any) imposed by law or issued by arbitration institutions within your jurisdiction as to arbitrator independence, neutrality and/or impartiality and for disclosure of potential conflicts of interest for arbitrators?

Articles 13 and 14 of the BAL provide that arbitrators must be independent and impartial and must disclose, before the acceptance of the appointment to act as arbitrators, any facts likely to give rise to justified doubts as to their independence and impartiality. The BAL also provides that the circumstances under which the judges are barred from hearing a case are applicable to the individuals functioning as arbitrators. On a decision on the recognition and enforcement of a foreign award rendered on 19 April 2017, the Federal Court of Appeals has reaffirmed that the impartiality of the arbitrators is a matter of public policy, which allows it to analyse the issue regardless of the decision previously rendered by the foreign court (SEC 9.412-EX).

6. Procedural Rules

6.1 Are there laws or rules governing the procedure of arbitration in your jurisdiction? If so, do those laws or rules apply to all arbitral proceedings sited in your jurisdiction?

Unless the parties have agreed otherwise, the BAL and the procedural principles set forth by the Brazilian Code of Civil Procedure apply to all arbitral proceedings sited in Brazil.

6.2 In arbitration proceedings conducted in your jurisdiction, are there any particular procedural steps that are required by law?
Chapter IV of the BAL provides that arbitration proceedings will be conducted as agreed by the parties in the arbitration agreement (which may refer to the rules and procedural steps of an arbitration institution), otherwise the arbitral tribunal will decide on the procedural steps.

6.3 Are there any particular rules that govern the conduct of counsel from your jurisdiction in arbitral proceedings sited in your jurisdiction? If so: (i) do those same rules also govern the conduct of counsel from your jurisdiction in arbitral proceedings sited elsewhere; and (ii) do those same rules also govern the conduct of counsel from countries other than your jurisdiction in arbitral proceedings sited in your jurisdiction?

The Code of Ethics of the Brazilian Bar Association applies to all Brazilian counsel irrespective of the place they are conducting proceedings. The rules do not apply to foreign counsel, unless they are licensed to practise in Brazil. Often, arbitrators will hold foreign lawyers to the same standards of Brazilian counsel in connection with arbitrations that take place in Brazil.

6.4 What powers and duties does the national law of your jurisdiction impose upon arbitrators?
In performing his duty, the arbitrator must behave in an independent, impartial, diligent, discreet and competent manner (Article 13, Sixth Paragraph, of the BAL).

6.5 Are there rules restricting the appearance of lawyers from other jurisdictions in legal matters in your jurisdiction and, if so, is it clear that such restrictions do not apply to arbitration proceedings sited in your jurisdiction?
The Code of Ethics of the Brazilian Bar Association does not allow foreign lawyers to act in legal matters in Brazil. Such restriction, however, does not apply to arbitration proceedings. The BAL does not require that counsels in arbitration proceedings (Article 21, Third Paragraph) be qualified to practise in Brazil or abroad. As indicated above, however, often arbitrators will hold foreign lawyers to the same standards of Brazilian counsel in connection with arbitrations that take place in Brazil.

6.6 To what extent are there laws or rules in your jurisdiction providing for arbitrator immunity?
Although there are no specific provisions as to an arbitrator’s immunity, arbitrators are liable for their acts when they have acted with intent or gross negligence.

6.7 Do the national courts have jurisdiction to deal with procedural issues arising during an arbitration?

The arbitral tribunal will settle procedural issues.

7. Preliminary Relief and Interim Measures

7.1 Is an arbitral tribunal in your jurisdiction permitted to award preliminary or interim relief? If so, what types of relief? Must an arbitral tribunal seek the assistance of a court to do so?
An arbitrator is entitled to award any kind of preliminary or interim relief. However, arbitrators might seek the assistance of national courts to enforce reliefs if necessary.

7.2 Is a court entitled to grant preliminary or interim relief in proceedings subject to arbitration? In what circumstances? Can a party’s request to a court for relief have any effect on the jurisdiction of the arbitration tribunal?

The parties are only entitled to request relief from a national court before the arbitral tribunal is constituted. In this case, the arbitral tribunal, after its constitution, will take on the matter that was being handled by the courts and will decide on whether to uphold or overturn the court’s decision regarding such relief.

During the arbitral proceedings, the parties must request relief directly from the arbitral tribunal, which is the only court with jurisdiction to grant such relief. Any measure requested to national courts during the course of arbitral proceedings will be ineffective. There are, however, two situations where the courts may have jurisdiction to grant interim and preliminary reliefs during an arbitral proceeding. The parties may have expressly agreed to limit the jurisdiction of the arbitral tribunal, preventing it from awarding preliminary relief or interim measures. The other exception (rarely seen) concerns the situation where the circumstances demand urgent relief and the arbitral tribunal is not available to award such measure in time.

7.3 In practice, what is the approach of the national courts to requests for interim relief by parties to arbitration agreements?
Since there is a pro-arbitration approach in Brazil, it is most likely that Brazilian courts will deny any request of interim relief where there is an ongoing arbitral proceeding.

7.4 Under what circumstances will a national court of your jurisdiction issue an anti-suit injunction in aid of an arbitration?
Whenever there is an arbitration agreement between the parties and one of them seeks to circumvent such agreement by filing its grievances in court.

7.5 Does the law of your jurisdiction allow for the national court and/or arbitral tribunal to order security for costs?
The Brazilian Code of Civil Procedure provides that a claimant that is domiciled abroad or has no headquarters or affiliates within the Brazilian territory is required to make a security deposit for costs and lawyers’ fees (Article 83). The security for costs will not be required should the claimant have a real estate property within the Brazilian territory or should the relevant lawsuit be an enforcement proceeding. Also, courts may order security before it enters an interim relief that may harm the respondent (Article 300).

Nevertheless, the abovementioned provisions are not mandatory for arbitral tribunals. Furthermore, while national courts and arbitral tribunals are seldom faced with such request, there is no provision barring orders concerning security for costs, which may be allowed under a broad power to grant interim reliefs.

7.6 What is the approach of national courts to the enforcement of preliminary relief and interim measures ordered by arbitral tribunals in your jurisdiction and in other jurisdictions?

The arbitral tribunal may seek the assistance of national courts in order to enforce preliminary reliefs and interim measures in case parties do not voluntarily comply with them. Article 22-C of the BAL and Article 237, IV, of the Code of Civil Procedure, provide that, under the request of the arbitral tribunal, a court may perform, or order the parties to perform, a relief issued by the arbitrators.

In such case, the courts may only proceed to a formal analysis of its own jurisdiction and the existence of the minimum required documents to enforce interim and preliminary reliefs, as well as to a prima facie examination regarding the existence, validity and effectiveness of an arbitration agreement.

The parties may choose the rules of evidence that will apply to the arbitral proceedings or, in the absence of a choice in this regard, the rules will be decided by the arbitral tribunal. In both cases, the rules of evidence must comply with the guidelines set forth by the BAL and the Brazilian Constitution.

8.2 What powers does an arbitral tribunal have to order disclosure/discovery and to require the attendance of witnesses?

Discovery – as the term is used in common law countries and which involves a broad-scope, lawyer-controlled search for physical or electronic evidence – is not contemplated by Brazilian law. Nevertheless, local laws do provide for a variety of evidence that may be produced in the course of an arbitration as well as a court proceeding. In Brazil, parties are not obligated to present evidence that might harm their defence. Nevertheless, if the parties have agreed otherwise, the arbitral tribunal may order such disclosure, including third-party disclosure, such as access to privileged banking information.

8.3 Under what circumstances, if any, can a national court assist arbitral proceedings by ordering disclosure/discovery or requiring the attendance of witnesses?

As mentioned above, discovery is not contemplated by Brazilian law. Nevertheless, the arbitrator (should he/she have been granted with such powers) may request the parties to present documents or hear witnesses that they deem necessary for the understanding of the dispute, as well as request an expert examination (Article 22 of the BAL). If a party ordered to present a document (or e-file) fails to do so, an arbitral tribunal may seek assistance from a national court in enforcing the decision it rendered in favour of the delivery of such document.

8.4 What, if any, laws, regulations or professional rules apply to the production of written and/or oral witness testimony? For example, must witnesses be sworn in before the tribunal and is cross-examination allowed?
The rules that apply to the hearing of witnesses in civil procedures will often apply to oral testimonies in local arbitrations. The Brazilian Code of Civil Procedure sets forth that individuals providing oral witness testimonies must swear to speak the truth under the penalty of criminal sanctions (Article 458).

8.5 What is the scope of the privilege rules under the law of your jurisdiction? For example, do all communications with outside counsel and/or in-house counsel attract privilege? In what circumstances is privilege deemed to have been waived?

Communications with outside counsel and/or in-house counsel attract privilege. However, the concept of “privilege” is not as developed, and case-law protected, as in certain Anglo-Saxon countries.

9. Making an Award

9.1 What, if any, are the legal requirements of an arbitral award? For example, is there any requirement under the law of your jurisdiction that the award contain reasons or that the arbitrators sign every page?

Article 24 of the BAL provides that the award be prepared in writing and signed by the arbitrators. Article 26 provides that the award must contain: (i) a report, including the qualification of the parties, and a summary of the dispute; (ii) the grounds for the decision, with due analysis of factual and legal issues; (iii) the actual decision; and (iv) the date of the award and the place where it was rendered.

9.2 What powers (if any) do arbitral tribunals have to clarify, correct or amend an arbitral award?

Article 30 of the BAL provides that the parties may submit a request for clarification of the award within five days of the receipt of the award in order to correct clerical, typographical and minor errors or clarify any dimness, doubt or contradiction of the award – the applicable arbitration rules may provide other deadlines and details. Arbitrators may also be requested to decide on an issue that should have been covered by the award but was not.

10. Challenge of an Award

10.1 On what bases, if any, are parties entitled to challenge an arbitral award made in your jurisdiction?

Article 32 of the BAL provides the grounds for challenging (declaration of nullity of) an award: (i) the arbitration agreement is null and void; (ii) the persons who rendered the award could not have acted as arbitrators; (iii) the award does not comply with the requirements set forth in Article 26 (see the answer to question 9.1 above); (iv) the award exceeded the limits imposed by the arbitration agreement; (v) the award does not address all of the issues submitted in the arbitration; (vi) the award was made through unfaithfulness, extortion or corruption; (vii) the making of the award exceeded the time limit stipulated by the parties; or (viii) the award violated the principles of due process, equal treatment of the parties, impartiality of the arbitrator and autonomy of the decision.

10.2 Can parties agree to exclude any basis of challenge against an arbitral award that would otherwise apply as a matter of law?

No. The list provided by law is mandatory.

10.3 Can parties agree to expand the scope of appeal of an arbitral award beyond the grounds available in relevant national laws?

In Brazil, there is no appeal against an arbitral award, except if a challenge to it before the courts is so considered. In any case, an award may only be challenged on the grounds provided in Article 32 of the BAL or if it violates public policy. The parties may neither expand the scope of appeal nor agree on new methods for judicial revision of the award.

10.4 What is the procedure for appealing an arbitral award in your jurisdiction?

As stated in question 10.3, appeals against an arbitration award are not allowed in Brazil. With respect to the procedure for challenging an award, the interested party may challenge an arbitral award rendered in Brazil by addressing its claim to the Brazilian courts within 90 (ninety) days as of the date when it was notified of the award.

11. Enforcement of an Award

11.1 Has your jurisdiction signed and/or ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? Has it entered any reservations? What is the relevant national legislation?

The New York Convention was internalised through Decree No. 4.311, dated 23 July 2002 and ratified with no reservations.

11.2 Has your jurisdiction signed and/or ratified any regional Conventions concerning the recognition and enforcement of arbitral awards?
Brazil is party to the Inter-American Convention on International Commercial Arbitration (internalised through Decree No. 1.902, dated 9 May 1996).

11.3 What is the approach of the national courts in your jurisdiction towards the recognition and enforcement of arbitration awards in practice? What steps are parties required to take?
In order to be recognised and enforced in Brazil, a foreign arbitral award must be homologated/ratified by the Federal Court of Appeals (STJ), following the rules provided in the Code of Civil Procedure; Resolution No. 09 of the Federal Court of Appeals; and the New York Convention. The rules include, for example, the need for the party requesting the recognition of the award to present the originals or certified and notarised copies of the arbitration agreement and the final award, both translated into Portuguese by a local Official Public Translator.
The Federal Court of Appeals has demonstrated a positive and proactive position towards the recognition of foreign arbitral awards and in the past years has correctly applied the New York Convention, especially concerning grounds for denial of the recognition and enforcement of foreign awards.

11.4 What is the effect of an arbitration award in terms of res judicata in your jurisdiction? Does the fact that certain issues have been finally determined by an arbitral tribunal preclude those issues from being re-heard in a national court and, if so, in what circumstances?
Issues decided in arbitration cannot be re-heard by national courts.

11.5 What is the standard for refusing enforcement of an arbitral award on the grounds of public policy? Enforcement may be refused on the grounds of public policy; for example, if there was a violation of due process (including failure to properly notify a party), absence of an arbitration agreement, lack of proper acceptance of arbitration by a party, and questions as to the nature of the dispute, such as the kind of right subjected to arbitration (certain rights may not be arbitrated in Brazil).

12. Confidentiality

12.1 Are arbitral proceedings sited in your jurisdiction confidential? In what circumstances, if any, are proceedings not protected by confidentiality? What, if any, law governs confidentiality?

The BAL does not provide for confidentiality. However, the parties or the rules of the institution to which the parties have referred their dispute may expressly provide for confidentiality, and therefore be binding upon the participants of the procedure. It is common to have arbitrations in Brazil treated with confidentiality. Article 2 of the BAL provides, nevertheless, that arbitral procedures to which a State entity is party to must respect the principle of publicity and therefore cannot be confidential. 12.2 Can information disclosed in arbitral proceedings be referred to and/or relied on in subsequent proceedings? This will depend on the agreement of confidentiality entered into by the parties. However, it is not a common practice, unless the subsequent arbitration involves the very same parties as the preceding one.

13. Remedies / Interests / Costs

13.1 Are there limits on the types of remedies (including damages) that are available in arbitration (e.g., punitive damages)?

Punitive and consequential damages are generally not allowed under Brazilian law. There is a trend, albeit still at the outset, to allow for a certain level of “punitive” damages in particular cases, but this trend has yet to find its way into arbitration proceedings. The actual definition of consequential damages needs to be made clear in the arbitration agreement, as there may be an overlap with damages deemed lawful under Brazilian law.

13.2 What, if any, interest is available, and how is the rate of interest determined?
The arbitral tribunal may award pre-award and post-award interests. Brazilian law provides for a default interest of 1% per month (not compounded).

13.3 Are parties entitled to recover fees and/or costs and, if so, on what basis? What is the general practice with regard to shifting fees and costs between the parties?
According to Article 27 of the BAL, the arbitral award will embody a decision as to the parties’ responsibility regarding the costs and expenses of the arbitration, as well as on any costs resulting from any possible bad faith/frivolous litigation. The rules of the chosen institution usually provide for recovery of fees and costs and the parties are entitled to determine how they want to regulate their affairs in this instance by inserting the appropriate guidelines in the submission agreement. Arbitration awards rendered in Brazil often follow the “loser-pays” concept that is adopted in most judicial proceedings, therefore imposing on the defeated party the payment of the fees and costs incurred in the proceedings.

13.4 Is an award subject to tax? If so, in what circumstances and on what basis?
The award itself is not subject to taxation, but the benefits of such award may result in taxation to the party, depending, for example, on whether amounts received have an indemnification nature or are of a compensatory nature. Gains by the victorious party will be taxed just as much as they would be in the case of a court decision in its favour.

13.5 Are there any restrictions on third parties, including lawyers, funding claims under the law of your jurisdiction? Are contingency fees legal under the law of your jurisdiction? Are there any “professional” funders active in the market, either for litigation or arbitration?

Brazilian law does not address the issue of funding claims; the concept is new in Brazil. There are individuals and entities (funds, investment houses, etc.) that offer these services on and off, but this is not a widespread market yet. Nevertheless, there has been a surge in interest by local parties in this “product” and the interest has been met by supply mostly from abroad. Contingency fees are legal and provided in Article 82 et seq. of the Brazilian Code of Civil Procedure.

14. Investor State Arbitrations

14.1 Has your jurisdiction signed and ratified the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (1965) (otherwise known as “ICSID”)?

Brazil has not signed the Washington Convention.

14.2 How many Bilateral Investment Treaties (BITs) or other multi-party investment treaties (such as the Energy Charter Treaty) is your jurisdiction party to?

Although Brazil has signed certain bilateral investment treaties, none have been ratified or entered into force. Recently, Brazil has entered into Treaties for Investment Cooperation and Facilitation with Angola, Chile, Colombia, Malawi, Mexico, Mozambique and Peru; nevertheless, none of these treaties provide for Investor-State Arbitration.

14.3 Does your jurisdiction have any noteworthy language that it uses in its investment treaties (for example in relation to “most favoured nation” or exhaustion of local remedies provisions)? If so, what is the intended significance of that language?

No, it does not.

14.4 What is the approach of the national courts in your jurisdiction towards the defence of state immunity regarding jurisdiction and execution?

Although Brazilian courts ensure, as a rule, sovereign immunity to foreign States, it is not applied unrestrictedly. Defence based on State immunity regarding jurisdiction might be pleaded only in regards to issues in connection with an act of State. On the other hand, a foreign State might be subject to enforcement proceedings in Brazil solely in two situations: where it waived its execution immunity; or where the enforcement measures concern assets with no connection to State prerogatives or assets that are not linked to diplomatic corps’ activities or property.

15. General

15.1 Are there noteworthy trends or current issues affecting the use of arbitration in your jurisdiction (such as pending or proposed legislation)? Are there any trends regarding the type of disputes commonly being referred to arbitration?

Two major laws affecting arbitration have come into force quite recently. On the one hand, the BAL was amended by Law No. 13.129, with the purpose of stabilising certain advances made possible by the development of case law and practice concerning, especially, the scope of application of arbitration, the choice of arbitrators, statute of limitations, relief measures and arbitral awards. On the other hand, the new Code of Civil Procedure (Federal Law No. 13.105) has become effective and has optimised the assistance of national courts to arbitral tribunals and the communication between domestic and foreign jurisdictions. Also, there were major amendments to Brazilian labour laws, which allowed arbitration clauses in certain labour contracts. Although several labour contracts already provide for arbitration as the dispute resolution mechanism, the success of this legal innovation is still to be confirmed by labour courts when asked to decide on requests for challenge and enforcement of arbitral awards.

Brazilian courts and practitioners are likely to react positively to these innovations in the legal framework of arbitration in Brazil, with a heightened defence and support for the process on the part of local courts, and a more vigorous push for new arbitrations locally.

The Federal Court of Appeals continues to follow a pro-arbitration trend, having rendered two relevant decisions in 2018, allowing the extension of an arbitration clause contained in a main contract to other related contracts, and confirming the jurisdiction of the arbitral tribunal to decide on corporate matters even in cases in which the company is undergoing a reorganisation proceeding (creditors’ protection).

15.2 What, if any, recent steps have institutions in your jurisdiction taken to address current issues in arbitration (such as time and costs)?

The International Chamber of Commerce established the court presence in Brazil through the opening of an office in São Paulo and the setting of a case management team in 2017. In 2018, a hearing centre was also inaugurated in São Paulo by the ICC in a partnership with the Industry National Confederation. The new office and hearing centre mark an important milestone for the expansion of the ICC in Brazil as well as evidence the growing relevance of arbitration in Brazil.

In 2018, two major arbitration institutions in the local market (CAM-CCBC and AMCHAM) have updated their arbitration rules.

Arbitral institutions in Brazil, alongside the Brazilian Arbitration Committee (CBAr), have sponsored lectures, conferences/seminars, and arbitration moots in order to disseminate the use of arbitration in Brazil and to encourage discussions with specialists on current issues in arbitration.